Stick to Your System

“Skip any trades you don’t fancy –
pick and choose, you just can’t lose.”

This advice is encouraging you to commit a trading blunder of great magnitude.

If you have a trading system, it has rules for when you should enter and when you should leave the market.

If you don’t have a system – you are in trouble because it is the systems traders who make all the money in the commodities markets.

Systems traders always follow their rules because they have tested them thoroughly to decide if their systems are capable of producing successful results.

That leaves no room for second guessing and changing the system as you go. In fact, systems traders delegate their routine trading to their computers to be run automatically without interference.

This delegation is a deliberate move to prevent them being tempted to meddle with their live trading - because that poses the biggest threat to their capital.

By not interfering with your live trades you are sticking to your system and obeying the most important rule of trading - follow your system.

Anyway, why would somebody start out with a system and then not follow it?

Many things could be said at this point! If the trader has just picked up any old system to use then he’s not a systems trader. Therefore he’s in trouble, as we said at the beginning of this article.

But if he has thoroughly tested and evaluated the system properly - then why wouldn’t he follow it – i.e. why would he want to interfere with it while it is live trading? The only grounds for doing this that make sense are that he doesn’t feel comfortable with his system.

Most likely, he doesn’t think the system should enter a trade that it otherwise will - or he thinks it should come out of a trade it’s already in.

He thinks he can do better than the system on this occasion. Perhaps he’s in a cautious mood due to a big loss he’s just suffered on another trade.

Or maybe, he’s recently had a big win and is feeling lucky.

So now we’re going to trade our moods are we? Yes, that’s exactly what we’ll do if we allow ourselves to get involved with our live trading.

Of course, if the trader thinks his system can be improved, there’s nothing wrong with him working on that - and changing the system if justified – but that work will all be done ‘off line’ and later substituted as the new live system.

Skipping a trade is not an option for a systems trader. If the system signals a trade, then it will be taken. Trading your moods is a road to certain ruin.

 

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Copyright David Bromley 2006
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